7 Airline Stocks Ready to Fly High

Stocks to buy

Airline stocks are always exciting for investors to consider.

On one hand, airliners are highly cyclical businesses, creating risk for investors to monitor. On the other hand, many of these airlines demonstrate great potential. This is especially true as they navigate their post-pandemic recoveries and continue to return to growth.

Although investors need to be sure to evaluate the risks and the rewards with these companies, these firms are ready to take flight. Without further delay, here are seven airline stocks worth buying now.

Hawaiian Holdings (HA)

A Hawaiian Airlines plan flying over the water.

Source: Markus Mainka / Shutterstock.com

As a small-cap stock, Hawaiian Airlines (NASDAQ:HA) presents a high-volatility option. However, there are multiple reasons to believe this volatility can pay off with juicy rewards.

I see Hawaiian Airlines as a deep-value play. I base this on the fact that the firm has yet to fully rediscover its pre-pandemic profitability. Moreover, HA stock has a forward price-to-sales ratio of 0.10x, implying that the marketplace underappreciates its ongoing recovery.

Hawaiian Airlines’ second-quarter earnings results back this up.

For instance, the company achieved an 11% year-over-year increase in capacity, naturally leading to a 2.2% increase in quarterly revenue. More impressively, its international revenue surged by 160% year over year.

Potentially lower input costs paired with sustainable demand will likely fuel Hawaiian Airlines’ recovery. As such, I think HA stock is best in class at this stage.

Delta Air Lines (DAL)

Delta (DAL) airlines plane mid take-off

Source: Markus Mainka / Shutterstock.com

Delta Air Lines (NYSE:DAL) rarely needs an introduction. It possesses a high-quality balance sheet and sublime commercial status.

However, do not think that such factors remove all cyclical risks. In fact, as illustrated by its relative strength index (or RSI) of 29.08, DAL stock oscillates instead of moving in the same direction. Thus, adjusting your exposure to the stock is critical.

Despite these risks, key metrics suggest it is a good time to buy DAL stock. For example, Delta’s P/E ratio of 7.96x convey that the stock is yet to return to its mean after an abrupt pandemic-induced selloff. Positive catalysts can help the airline return to its fair value.

To provide an example of a catalyst, Delta recently delivered robust earnings results. According to its second-quarter report, Delta achieved a record operating revenue of $14.6 billion, concurrently showcasing 19% year-over-year growth. Moreover, its operating profit margin increased by 2.4% to settle at 17.1%, implying that a lower cost base is evolving.

Altogether, Delta looks undervalued here. Consider hopping on board as it rides out the post-pandemic recovery.

Ryanair (RYAAY)

a Ryanair plane ready for boarding

Source: Dmitry Birin/Shutterstock.com

I wanted to throw Ryanair (NASDAQ:RYAAY) into the mix for two reasons. Firstly, the Irish airliner’s traffic is increasing exponentially. Secondly, RYAAY stock provides a diversification play to those with non-European-centric portfolios.

As mentioned before, Ryanair’s traffic is surging. Its August traffic surged by 12.2% year over year. The airline also forecasts a 9% uptick in traffic by the end of its current fiscal year.

Ryanair also delivers in terms of shareholder value.

RYAAY stock’s P/E ratio of 9.6x is supplemented by a return on equity ratio of 28.95%. I find the combination striking as it signals a sustainable value add. A robust ROE ratio also removes the possibility of RYAAY stock being a value trap.

American Airlines (AAL)

American Airlines plane on ramp in Chicago Airport. American Airlines is amongst the airlines cancelling flights

Source: GagliardiPhotography / Shutterstock.com

American Airlines (NASDAQ:AAL) has shed nearly 10% in market value in the past month. Much of its recent drawdown owes to events such as a counterfeit engine parts debacle, labor disputes, and a negative review from Citigroup . However, I cannot help but think that AAL stock presents a tremendous buy-the-dip opportunity.

Here’s why.

It’s typical for companies such as American Airlines to suffer from event-driven trading. Plus, AAL stock’s recent trading activity suggests its most recent risk factors are already baked into its stock price.

A key value driver to tap into here is the rapid expansion of American Airlines’ asset base. The company recently placed an order for seven E-Jets. Continuous expansion of its fleet paired with potential cost-cutting when fuel prices and interest rates ease will likely lead to higher net asset value, concurrently upping AAL stock’s valuation. Therefore, I believe a gradual post-pandemic recovery is in motion.

Let’s consolidate the argument by looking at shareholder value. American Airlines is clearly undervalued. AAL stock has a P/E ratio of 3.34x. A continued recovery might send the stock’s earnings beyond their current level, simultaneously leading to a higher absolute valuation.

SkyWest (SKYW)

A close-up shot of a SkyWest (SKYW) plane.

Source: Heather Dunbar / Shutterstock.com

TD Ameritrade recently listed SkyWest (NASDAQ:SKYW) as the top-performing airline stock since the turn of the year. SkyWest stock has surged by approximately 150% since the start of the 2023, with its most recent escalation primarily due to a series of earnings beats.

I see SKYW stock as a technical opportunity. More specifically, I believe the stock is a cross-sectional momentum play at this stage. For those unfamiliar, cross-sectional momentum is a market anomaly that occurs when a sector is trending upward. The basic theory behind the concept states that year-over-year outperformers will continue outperforming their sector peers in the following 2 to 12 months.

Tapping into its latest earnings release shows that SkyWest hosts robust fundamentals. The company achieved a revenue beat worth $17.89 million in its second quarter. Further, the firm trimmed operating costs by 2% year over year and decided to reward shareholders with $94 million in stock buybacks.

Another noteworthy factor is SkyWest’s $60 million in deferred revenue. The deferral might play into its already impressive price-to-sales ratio of 0.7x.

There’s no denying that SKYW stock looks good all around.

Southwest Airlines (LUV)

a southwest airline stocks (LUV) jet flying above the clouds

Source: Carlos E. Santa Maria / Shutterstock.com

Southwest Airlines (NYSE:LUV) stock seems like another buy the dip opportunity after a near-10% month-over-month decline.

According to Bank of America, LUV stock’s capitulation is due to negative news. As mentioned earlier, airliners tend to make headlines quite frequently. However, juxtaposing the market sentiment surrounding Southwest with its fundamentals suggests value is in store. Southwest is running on a solid balance sheet, with a cash per-share ratio of 15.35x and a current ratio of 1.25x. It has enough capital on hand to weather these short-term headwinds and align itself for long-term success.

From a technical vantage point, LUV stock is trading below its 50-, 100-, and 200-day moving averages, suggesting it might be oversold. Although LUV’s P/E ratio of 29.76x is on the higher end of the scale, I believe its earnings will revert to mean as time passes, justifying a higher valuation for its stock.

United Airlines (UAL)

a United (UAL) airplane flying through the sky

Source: NextNewMedia / Shutterstock.com

I decided to include United Airlines (NASDAQ:UAL) because it is a company on the offensive. The firm recently ordered 110 aircraft, including 50 787-9s from Boeing (NYSE:BA) and 60 A321neos from Airbus (OTCMKTS:EADSF).

Might United Airlines have been overzealous in its recent capital expenditure cycle? Yes, it is possible. However, I would like to give it the benefit of the doubt here as I believe that fortune favors the brave. Besides, United Airlines is sitting on cash from operations of $8.84 billion.

Furthermore, United Airlines recently beat estimates after delivering a $250 million revenue beat in its second fiscal quarter. More importantly, the firm raised its guidance for the year, stating that it believes its EPS will settle between $11 to $12, which is significantly higher than its previous estimate of $10 to $11.

From a market perspective, UAL stock’s P/E ratio of 5.18x seems alluring, especially considering its earnings momentum. Therefore, I deem UAL stock a strong buy.

On the date of publication, Steve Booyens did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Steve Booyens co-founded Pearl Gray Equity and Research in 2020 and has been responsible for institutional equity research and PR ever since. Before founding the firm, Steve spent time working in various finance roles in London and South Africa. He holds an MSc in Investment Banking from Queen Mary – University of London. Furthermore, Steve has passed CFA Levels 1 & 2 and is working toward his Ph.D. in Finance. His articles are published on various reputable web pages such as Seeking Alpha, TipRanks, Yahoo Finance, and Benzinga. Steve’s articles on InvestorPlace form an interesting juxtaposition between mainstream opinion and objective theory. Readers can expect coverage on frequently traded stocks, REITs, fixed-income funds, CEFs, and ETFs.